Wall Street turned lower Friday (Jan. 26) after a pair of reports indicated the economy is growing at a faster-than-anticipated pace, raising the likelihood that the Federal Reserve won’t cut interest rates anytime soon.
The Associated Press reported that the Commerce Department said new home sales rose 4.8% in December, well above economist projections and a sign that the slumping housing market might have bottomed out.
The department also said orders to U.S. factories for big-ticket manufactured goods rose in December by the largest amount in three months, led by demand for commercial aircraft.
Investors had been holding on to hopes that central bankers might cut rates in the first half of the year. However, a steady stream of positive economic data is making that unlikely and instead raising the possibility the Fed might have to resume its campaign of rate hikes that ended in August.
“The biggest driver is concern the Fed might see more reasons to raise rates than to lower,” said Arthur Hogan, chief market analysts at Jefferies & Co. “You can’t make the argument that earnings have been bad. If that were the driver, we’d be more in positive territory.”